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Policy Brief, An electronic publication of, The Allegheny Institute for Public Policy :April 12, 2007 Volume 7, Number 20 PAT Revamp: A Long Way to Go Is the worst over for the Port Authority? The board just voted to institute major service cuts that will go into effect in about two months. Fare increases or changes to the fare structure are scheduled for the beginning of 2008. And if there is no plan forthcoming to eliminate the remaining $45 million deficit by September, another round of service cuts will come. It is going to take the combined efforts of the state, County, PAT, its union, and riders to make the system financially stable. �Everybody needs to do their share� were the words of one board member. How eager are these parties to pitch in? And, if they are eager, will they make the meaningful changes necessary to solve PAT�s severe long-term problems? Here's what we know from the two most recent outside audits of the authority. The Governor�s Transportation and Funding Reform Commission (TFRC) audit found, among other things, that PAT possessed the following characteristics: * Highest transit wages rates in the country when adjusted for inflation * Is challenged by high labor, healthcare, and pension costs for current and retired employees * Focuses effort on fixed guideway development and service expansion rather than basic asset replacement maintenance And, in a stunner, the audit also found that PAT�s operating subsidy per passenger of $3.07 was twice that of SEPTA ($1.49 per passenger). There�s more. An audit by the Auditor General�s office found egregious compensation packages for PAT management, especially with pensions. Calling it �the most lucrative system we have seen in the public sector�, management�with board approval�had made changes that allowed accruing unlimited sick leave, changing the vesting period from ten years to five years, and granting the ability to buy back unlimited years of service. Those audits have bolstered the case that PAT is an agency desperately in need of change. The board, as mentioned, has begun �right sizing� the system and overly generous management pension perks are on their way out. The Allegheny Institute�s work has, on many occasions, pointed out the out-of-line nature of the transit authority in comparison with other systems around the nation. We also know that the state is providing over $550 million annually for mass transit across the state from various funding streams. In 2006, PAT received $130 million from the state, about 60 percent of its entire operating subsidy. Where do we stand as far as everyone �doing their part� is concerned? Riders have been asked to sacrifice through service cuts. Management is taking a hit to pension benefits and job cuts. Taxpayers are paying enough. That leaves the Amalgamated Transit Union. The union�s president has stated that workers �have done their part already� and will no doubt point to the impending layoffs of 150 operators and 85 mechanics as more than enough. Of course, we have yet to see what type of severance packages or early retirement incentives the Port Authority and the union are negotiating. Ironically, with the enormous retiree medical legacy costs facing the authority, reducing employment will raise the ratio of benefits to wages paid. It already stands at 70 percent. Unfortunately, in advance of the June workforce reductions we still don�t know what the actual cost savings will be. The comments of the union president directly conflict with the admonition of the PAT board member. �If I were the union leader, I would ask what can we do and how can we help and what can we give back to keep buses on the street and people in jobs.� Here�s what should be done, but won�t: reopen the current contract and strike out the language that prevents the use of smaller, more efficient buses on fixed route service. As we discussed in a previous Policy Brief (Volume 7, Number 8), there is an artificial and unnecessary cap on their use. Second, obtain union permission for private operators to operate the PAT routes vacated by the 15 percent service cut. The operators should be permitted to charge a fare that is in line with the cost of the service and be allowed to lease unused PAT buses at a very low cost to make the routes economically viable. Some authority services are already provided by private firms: auditing, some maintenance, ACCESS, cleaning, etc. There is simply no good reason to prevent an outside party from running routes that the authority can no longer afford to operate. The attitude of the union needs to be one of sincerity and they need to bargain with the goal of preserving and improving the system. Of course, the union�s view is that they have won all their goodies at the bargaining table fair and square. But they need to understand that the rules by which they play the negotiation game are heavily slanted in their favor from the outset: PAT is the monopoly transit provider in Allegheny County and the union has a monopoly on providing workers who also have the right to strike and shut down a vital public service. That�s a far cry from a private sector union in a competitive environment where market forces limit their demands. They have missed the bus on this fact. But they need to know this: taxpayers have no moral obligation to provide any more money until this exorbitantly expensive and inefficient system is fixed. Jake Haulk, Ph.D., President Eric Montarti, Policy Analyst Note: The 2007 Pennsylvania Leadership Conference will be held on April 20th and 21st in Harrisburg, PA. Guest speakers will include Laura Ingraham, Pat Toomey, and Newt Gingrich. For more information, and to register, please log onto: www.paleadershipconference.org. Please visit our blog at alleghenyinstitute.org/blog. If you have enjoyed reading this Policy Brief and would like to send it to a friend, please feel free to forward it to them. For more information on this and other topics, please visit our website: www.alleghenyinstitute.org If you wish to support our efforts please consider becoming a donor to the Allegheny Institute. The Allegheny Institute is a 501©(3) non-profit organization and all contributions are tax deductible. Please mail your contribution to: The Allegheny Institute 305 Mt. Lebanon Boulevard Suite 208 Pittsburgh, PA 15234 Links * PAT category:Planks_from_elsewhere